Monthly Archives

June 2013

US Cyber-Sting Catches Chinese National Attempting to Export Sensitive Technology

By Export

A Chinese citizen pleaded guilty last Thursday at the federal courthouse in Brooklyn to violating the International Emergency Economic Powers Act by attempting to export weapons-grade carbon fiber from the United States to China. The guilty plea follows an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the Defense Criminal Investigative Service and the U.S. Department of Commerce Office of Export Enforcement.

Lisong Ma, 34, was arrested after attempting to close a deal to acquire and export the specialized materials, which have applications in the defense and aerospace industries and are therefore controlled for export by the United States.

“The defendant tried to circumvent laws that protect our national security by preventing specialized technologies from falling into the wrong hands. The defendant was bent on exporting to China up to five tons of weapons-grade carbon fiber — enough carbon fiber to stretch from Brooklyn to the Pacific Ocean,” stated United States Attorney Loretta E. Lynch. “Today’s conviction should leave no doubt that the United States will use every available technique, including covert cyber operations, to maintain the superiority of our nation’s armed forces.”

During the investigation, federal agents tasked with protecting sensitive technology maintained a covert cyber-presence on web sites related to the brokering, purchase and sale of controlled commodities. In February 2013, the defendant, using the name “Ma Li,” e-mailed an undercover agent and indicated that he was interested in acquiring several different types of high-grade carbon fiber. Then, through various online communications, the defendant attempted to negotiate the purchase of five tons of carbon fiber. Based on a review of Internet Protocol log-in information, investigators discovered that the defendant was communicating from the People’s Republic of China.

On March 12, 2013, the defendant and undercover agents engaged in an online video teleconference session, which was recorded. During the teleconference, the defendant and the undercover agents discussed the license requirement to export certain types of carbon fiber from the United States. One of the agents told the defendant: “We can’t send this to China without an export license, otherwise we risk going to jail.” The defendant then told agents that he would soon be traveling to the United States, and arranged a meeting to further discuss the terms of a deal. On March 27, 2013, the defendant met with undercover agents in the United States. During the meeting, which was covertly recorded, the defendant requested a sample of carbon fiber, because it was “easier” and “safer” to ship, and later commented: “There is a greater chance that the authorities will arrest you if you get a third party involved. That is why it’s better to go directly from the U.S. to China.”

The defendant ultimately decided to ship a sample of weapons-grade, Toray-type T-800 carbon fiber from the United States to China. He paid the undercover agents and placed the material into a plain brown box. Ma falsely indicated on the waybill and invoice that the package contained “clothing.” After the defendant finished packing the box and completing the shipping forms, the package was transported to a courier service, to be shipped to China. The package was thereafter intercepted by agents before it could be exported. Agents also intercepted and arrested the defendant shortly thereafter, as he transited Los Angeles International Airport on his way to Shanghai. He was then removed in custody to Brooklyn.

When sentenced, Ma faces up to 20 years in prison, as well as forfeiture and a fine of up to $1 million.


$1 Million Counterfeit Merchandise Seized from Baton Rouge Store

By Customs IP Enforcement

U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), along with the Louisiana Attorney General’s Office, seized 3,082 counterfeit items with a manufacturer’s suggested retail price of more than $1 million from a Baton Rouge business last week. The seized items included counterfeit designer clothing and electronics.

HSI and the Attorney General’s office executed a search warrant at Fashion Express, located on Airline Highway, following an HSI investigation that included multiple undercover buys of counterfeit merchandise. HSI served at least two warning letters to the business regarding the illegal sale of counterfeit merchandise prior to the seizure operation.

“Criminals who sell counterfeit products are parasites on the legitimate businesses that drive our economy,” said Special Agent in Charge of HSI New Orleans Raymond R. Parmer Jr. “The profits of black-market counterfeit sales are routinely diverted to support further criminal activity such as drug trafficking, money laundering and even potential terrorism.” Parmer oversees a five-state area of responsibility including Louisiana, Alabama, Arkansas, Mississippi and Tennessee.

Some of the counterfeit trademarked items seized during the operation include Michael Kors, Nike, Louis Vuitton, Prada, Coach and Polo merchandise. While searching the premises, HSI special agents also discovered thousands of counterfeit name-brand tags and labels that indicate counterfeit merchandise was being assembled inside the store.


One of World’s Largest Digital Currency Companies Charged with Money Laundering

By Internet / eCommerce, Technology Transactions

U.S. attorney and representatives from several law enforcement agencies announced an indictment charging Liberty Reserve, one of the world’s largest digital currency companies, and seven of its principals and employees with money laundering and operating an unlicensed money transmitting business. The charges stem from an investigation by the Global Illicit Financial Team which consists of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the U.S. Secret Service and the Internal Revenue Service’s (IRS) Criminal Investigations Division.

Law enforcement officials arrested five defendants. Arthur Budovsky, 39, the principal and founder of Liberty Reserve, and Azzeddine El Amine, 46, a manager of Liberty Reserve’s financial account, were both arrested in Spain. Vladimir Kats, 41, the cofounder of Liberty Reserve, was arrested in Brooklyn. Mark Marmilev, 33, and Maxim Chukharev, 27, both who helped design and maintain Liberty Reserve’s technological infrastructure, were arrested in Brooklyn and Costa Rica, respectively.

The defendants are each charged with one count of conspiracy to commit money laundering, which carries a maximum term of 20 years in prison, one count of conspiracy to operate an unlicensed money transmitting business, which carries a maximum term of five years in prison, and operation of an unlicensed money transmitting business, which carries a maximum term of five years in prison.

Two other defendants, Ahmed Yassine Abdelghani (“Yassine”) and Allan Esteban Hidalgo Jimenez (“Hidalgo”) are at large in Costa Rica.

The defendants are accused of structuring Liberty Reserve as a criminal bank-payment processor, designed to help users conduct transactions anonymously and launder the proceeds of their crimes. Liberty Reserve is alleged to have had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions – virtually all of which were illegal. Law enforcement officials believe that more than $6 billion in suspected criminal proceeds have been laundered via Liberty Reserve because it provided an infrastructure that enabled cyber criminals around the world to conduct anonymous and untraceable financial transactions.

The defendants also protected the criminal infrastructure of Liberty Reserve by, among other things, lying to anti-money laundering authorities in Costa Rica and pretending to shut down the company after learning it was being investigated by U.S. law enforcement. They continued operating the business through a set of shell companies, moving millions of dollars through shell company accounts maintained in Cyprus, Russia, China, Hong Kong, Morocco, Spain, Australia and elsewhere.

In addition to the criminal charges brought in the indictment, law enforcement seized the Liberty Reserve domain name and the domain names of four exchanger websites that were controlled by one or more of the defendants. They also restrained or seized 45 bank accounts. Prosecutors filed a civil action against 35 exchanger websites seeking the forfeiture of the exchangers’ domain names because the websites were used to facilitate the Liberty Reserve money laundering conspiracy and constitute property involved in money laundering.

The U.S. Department of the Treasury and its Financial Crimes Enforcement Network also named Liberty Reserve as a financial institution of primary money laundering concern under Section 311 of the Patriot Act.

“The actions of the U.S. Secret Service, IRS and HSI in dismantling the Liberty Reserve operation are critical because transnational criminal organizations can succeed only so long as they can funnel their illicit proceeds freely and without detection,” said HSI New York Special Agent in Charge James T. Hayes Jr. “HSI is proud of its partnership through the Global Illicit Financial Team and will continue to aggressively target financial institutions that deliberately enable businesses and individuals to evade global financial systems in furtherance of criminal schemes.”

The investigation and takedown involved law enforcement action in 17 countries, including: Costa Rica, the Netherlands, Spain, Morocco, Sweden, Switzerland, Cyprus, Australia, China, Norway, Latvia, Luxembourg, the United Kingdom, Russia, Canada and the United States.

Several international law enforcement agencies also participated in the investigation, including: the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, the Swedish National Bureau of Investigation’s Financial and Economic Crime Unit and Cyber Crime Unit, and the Swiss Federal Prosecutor’s Office.